CORINTHIA FINANCE plc

Transcription

1 Offering Memorandum dated 11 March 2002 CORINTHIA FINANCE plc A member of the Corinthia Group of Companies CORINTHIA FINANCE p.l.c. (registered with limited liability in the Republic of Malta) ISSUE OF LM4,000, % BONDS 2012 OF A NOMINAL VALUE OF LM100 ISSUED AT PAR (SUBJECT TO AN OVER-ALLOTMENT OPTION AS DESCRIBED BELOW) EURO 10,000, % BONDS 2010 OF A NOMINAL VALUE OF 100 ISSUED AT 97 PER BOND (SUBJECT TO AN OVER-ALLOTMENT OPTION AS DESCRIBED BELOW) GUARANTEED BY CORINTHIA PALACE HOTEL COMPANY LIMITED (registered with limited liability in the Republic of Malta) Corinthia Finance p.l.c. (the Company ) is hereby offering to the public in Malta Lm4 million 6.75 per cent Bonds due 2012 having a nominal value of Lm100 each and issued at par (the ML Bond ) and 10 million 6.5 per cent Bonds due 2010 having a nominal value of 100 issued at 97 (the Euro Bond ) each, jointly referred to as the Bonds. The Bonds are guaranteed by Corinthia Palace Hotel Company Limited (the Guarantor or CPHCL ). The ML Bond will, unless previously purchased and cancelled, be redeemed by the Company on the 8 April 2012 and the Euro Bond will, unless previously purchased and cancelled, be redeemed by the Company on the 8 April 2010 (See Terms and Conditions of the Bonds ). Interest on the Bonds will become due and payable in the case of the ML Bond semi-annually in arrears on the 8 April and on the 8 October in each year at the rate of 6.75 per cent per annum and annually in arrears on the 8 April in each year at the rate of 6.5 per cent per annum with respect of the Euro Bond. The first interest payment shall become due and payable on the 8 October 2002 with respect to the ML Bond and 8 April 2003 with respect to the Euro Bond. In the event that during the Offer Period the Company receives applications for Bonds in excess of the Original Bond Issues (as defined below) the Company may increase the Bonds in issue by an aggregate of Lm4,000,000 (or their equivalent in Euro) in either or both of the ML Bond or the Euro Bond (the Over-allotment Option ) (See Allocation Policy below). The Company also reserves the right in the event of an over-subscription in the ML Bond and an under-subscription in the Euro Bond or vice-versa, subject to the consent of an Applicant, to re-allocate over-subscriptions received in one Issue to under-subscriptions received in another (the Re-allocation Option and Allocation Policy below). The proceeds from the Bonds will be advanced by the Company to the Guarantor for its general funding purposes (See Purpose of the Issues below). The Bonds are fully underwritten by Bank of Valletta p.l.c. (the Underwriter ) so that any amount of the Original Bond Issues not taken up by investors will be purchased by the Underwriter. The Bonds constitute the general, direct, unconditional, unsecured and unsubordinated obligations of the Company and the Guarantor and will rank pari passu without any priority or preference with all other present and future unsecured and unsubordinated obligations of the Company and the Guarantor. Application has been made to the Malta Stock Exchange (the Malta Stock Exchange or MSE ) for the Bonds to be admitted to its Official List (the MSE Official List ) and for dealings to commence on the Malta Stock Exchange. MANAGER & UNDERWRITER SPONSORING STOCKBROKER Wilfred Mallia Bank of Valletta p.l.c. CORINTHIA FINANCE P.L.C. A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 1

2 IMPORTANT INFORMATION THIS DOCUMENT CONSTITUTES AN OFFERING MEMORANDUM AND CONTAINS INFORMATION ON AN ISSUE BY CORINTHIA FINANCE P.L.C. (THE COMPANY ) OF TWO BONDS NAMELY LM4 MILLION 6.75 PER CENT BONDS 2012 OF A NOMINAL VALUE OF Lm100 ISSUED AT PAR AND 10 MILLION 6.5 PER CENT BONDS 2010 OF A NOMINAL VALUE OF 100 ISSUED AT 97, BOTH GUARANTEED BY CORINTHIA PALACE HOTEL COMPANY LIMITED (THE GUARANTOR ). THIS DOCUMENT ALSO CONTAINS INFORMATION ABOUT THE COMPANY AND THE GUARANTOR IN COMPLIANCE WITH THE REQUIREMENTS OF THE MALTA STOCK EXCHANGE. THE DIRECTORS OF THE COMPANY, WHOSE NAMES APPEAR UNDER THE HEADING DIRECTORS (THE DIRECTORS ), ARE THE PERSONS RESPONSIBLE FOR THE INFORMATION CONTAINED IN THIS OFFERING MEMORANDUM, SAVE FOR THE INFORMATION SPECIFICALLY RELATING TO THE GUARANTOR, FOR WHICH THE DIRECTORS OF THE GUARANTOR ARE RESPONSIBLE. TO THE BEST OF THE KNOWLEDGE AND BELIEF OF THE DIRECTORS OF THE COMPANY AND THE GUARANTOR (WHO HAVE ALL TAKEN REASONABLE CARE TO ENSURE SUCH IS THE CASE), THE INFORMATION CONTAINED IN THIS OFFERING MEMORANDUM IS IN ACCORDANCE WITH THE FACTS AND DOES NOT OMIT ANYTHING LIKELY TO AFFECT THE IMPORT OF SUCH INFORMATION. THE DIRECTORS ACCEPT RESPONSIBILITY ACCORDINGLY. NO BROKER, DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORISED BY THE COMPANY, THE GUARANTOR OR THEIR RESPECTIVE DIRECTORS, TO ISSUE ANY ADVERTISEMENT OR TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE SALE OF THE BONDS (AS DEFINED HEREIN) OTHER THAN THOSE CONTAINED IN THIS OFFERING MEMORANDUM AND IN THE DOCUMENTS REFERRED TO HEREIN, IN CONNECTION WITH THE ISSUES HEREBY MADE, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORISED BY THE COMPANY, THE GUARANTOR OR THEIR RESPECTIVE DIRECTORS. THE MALTA STOCK EXCHANGE ACCEPTS NO RESPONSIBILITY FOR THE CONTENTS OF THIS OFFERING MEMORANDUM, MAKES NO REPRESENTATIONS AS TO ITS ACCURACY OR COMPLETENESS AND EXPRESSLY DISCLAIMS ANY LIABILITY WHATSOEVER FOR ANY LOSS HOWEVER ARISING FROM OR IN RELIANCE UPON THE WHOLE OR ANY PART OF THE CONTENTS OF THIS OFFERING MEMORANDUM. THIS OFFERING MEMORANDUM DOES NOT CONSTITUTE AND MAY NOT BE USED FOR PURPOSES OF AN OFFER OR INVITATION TO SUBSCRIBE FOR BONDS BY ANY PERSON IN ANY JURISDICTION (I) IN WHICH SUCH OFFER OR INVITATION IS NOT AUTHORISED OR (II) IN WHICH THE PERSON MAKING SUCH OFFER OR INVITATION IS NOT QUALIFIED TO DO SO OR (III) TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR INVITATION. IT IS THE RESPONSIBILITY OF ANY PERSONS IN POSSESSION OF THIS OFFERING MEMORANDUM AND ANY PERSONS WISHING TO APPLY FOR BONDS TO INFORM THEMSELVES OF, AND TO OBSERVE AND COMPLY WITH, ALL APPLICABLE LAWS AND REGULATIONS OF ANY RELEVANT JURISDICTION. PROSPECTIVE APPLICANTS FOR BONDS SHOULD INFORM THEMSELVES AS TO THE LEGAL REQUIREMENTS OF SO APPLYING AND ANY APPLICABLE EXCHANGE CONTROL REQUIREMENTS AND TAXES IN THE COUNTRIES OF THEIR NATIONALITY, RESIDENCE OR DOMICILE. THE BONDS HAVE NOT BEEN NOR WILL THEY BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE 1933 ACT ) OR UNDER ANY STATE SECURITIES LAW AND, EXCEPT WITH THE SPECIFIC CONSENT OF THE DIRECTORS, MAY NOT BE OFFERED OR SOLD DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OF AMERICA, ITS TERRITORIES OR POSSESSIONS OR ANY AREA SUBJECT TO ITS JURISDICTION (THE UNITED STATES ) OR TO ANY UNITED STATES PERSON (AS DEFINED IN REGULATIONS OF SUCH ACT, AS AMENDED FROM TIME TO TIME). IN ADDITION THE COMPANY WILL NOT BE REGISTERED UNDER THE UNITED STATES INVESTMENT COMPANY ACT OF 1940), AS AMENDED (THE 1940 ACT ) AND THE INVESTORS WILL NOT BE ENTITLED TO THE BENEFITS OF THE 1940 ACT. BASED ON INTERPRETATIONS OF THE 1940 ACT BY THE STAFF OF THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION RELATING TO FOREIGN INVESTMENT COMPANIES, IF THE COMPANY HAS MORE THAN 100 BENEFICIAL OWNERS OF ITS SECURITIES WHO ARE UNITED STATES PERSONS, IT MAY BECOME SUBJECT TO THE 1940 ACT. THE DIRECTORS WILL NOT KNOWINGLY PERMIT THE NUMBER OF HOLDERS WHO ARE UNITED STATES PERSONS TO EXCEED 70. A COPY OF THIS OFFERING MEMORANDUM HAS BEEN REGISTERED WITH THE REGISTRAR OF COMPANIES, IN ACCORDANCE WITH THE ACT AND SUBMITTED WITH THE MALTA STOCK EXCHANGE IN SATISFACTION OF THE LISTING PARTICULARS FOR THE BONDS. STATEMENTS MADE IN THIS OFFERING MEMORANDUM ARE, EXCEPT WHERE OTHERWISE STATED, BASED ON THE LAW AND PRACTICE CURRENTLY IN FORCE IN MALTA AND ARE SUBJECT TO CHANGES THEREIN. 2 CORINTHIA FINANCE P.L.C. A MEMBER OF THE CORINTHIA GROUP OF COMPANIES

3 THE COMPANY HAS APPLIED TO THE MALTA STOCK EXCHANGE FOR THE BONDS BEING ISSUED PURSUANT TO THIS OFFERING MEMORANDUM TO BE QUOTED ON THE MSE OFFICIAL LIST. THE BOND ISSUES HAVE BEEN UNDERWRITTEN BY BANK OF VALLETTA P.L.C. THE VALUE OF INVESTMENTS CAN GO UP OR DOWN AND PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE NOMINAL VALUE OF THE BONDS ON OFFER WILL BE REPAYABLE IN FULL UPON REDEMPTION. IF YOU NEED ADVICE YOU SHOULD CONSULT A LICENSED STOCKBROKER OR AN INVESTMENT ADVISER LICENSED UNDER THE INVESTMENT SERVICES ACT, CAP. 370 OF THE LAWS OF MALTA. PERMISSION FROM THE MALTA FINANCIAL SERVICES CENTRE FOR THE ISSUE OF THIS OFFERING MEMORANDUM IN TERMS OF SECTION 11 OF THE INVESTMENT SERVICES ACT, CAP. 370 OF THE LAWS OF MALTA IS NOT REQUIRED BY VIRTUE OF THE EXEMPTIONS CONTAINED IN LEGAL NOTICES 6 AND 95 OF FORWARD-LOOKING STATEMENTS This Offering Memorandum contains forward-looking statements that include, among others, statements concerning the Company s and the Guarantor s strategies and plans relating to the attainment of those objectives, its capital requirements and other statements of expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts and which may involve predictions of future circumstances. Investors can generally identify forward-looking statements by the use of terminology such as may, will, expect, intend, plan, estimate, anticipate, believe or similar phrases. These forward-looking statements are inherently subject to a number of risks, uncertainties and assumptions. Important factors that could cause actual results to differ materially from the expectations of the Company s or the Guarantor s Directors include those risks identified under the headings RISK FACTORS, TRADING PROSPECTS and elsewhere in this Offering Memorandum. The Company and the Guarantor caution the reader that these forward-looking statements are subject to risks and uncertainties that could cause actual events or results to differ from those expressed or implied by the statements and no assurance is given that the future results or expectations will be achieved. CORINTHIA FINANCE P.L.C. A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 3

4 TABLE OF CONTENTS IMPORTANT INFORMATION...2 FORWARD-LOOKING STATEMENTS...3 TABLE OF CONTENTS...4 DEFINITIONS...6 DIRECTORS AND ADVISERS OF THE COMPANY...8 KEY FEATURES...9 RISK FACTORS...11 PART I - THE BOND ISSUES...12 Details of the Bond Issue...12 Purpose of the Issue...13 Placing Arrangements...13 Allocation Policy...13 Offer Expenses...14 Directors...14 Authorisations...14 Underwriting...14 TAXATION...14 Tax on Interest...14 Tax on discount...14 Tax on Capital Gains...15 PART II - THE COMPANY...16 BUSINESS...16 DIRECTORS SERVICE CONTRACTS...16 AGGREGATE EMOLUMENTS OF DIRECTORS...16 LOANS TO DIRECTORS...16 PART III - THE GUARANTOR...17 SHARE CAPITAL...17 STRATEGIES...17 TRADING PROSPECTS...18 BUSINESS...19 Malta Operations CORINTHIA FINANCE P.L.C. A MEMBER OF THE CORINTHIA GROUP OF COMPANIES

5 Libya Operations...20 BUSINESS UNDERTAKEN THROUGH SUBSIDIARIES...21 MALTESE SUBSIDIARIES...24 FOREIGN SUBSIDIARIES AND ASSOCIATED COMPANIES...25 OTHER COMPANIES...29 MANAGEMENT...30 WORKING CAPITAL...32 PART IV - THE GUARANTEE...33 PART V - GENERAL INFORMATION...34 Incorporation...34 Share Capital...34 Appointment of Directors...34 Powers of Directors...34 Commissions...35 Exchange Control...35 Directors Interests...35 Litigation...35 Accountants Report...36 Material Contracts...36 Loan Capital & Borrowings...36 Documents for inspection...36 ANNEX A TERMS AND CONDITIONS...37 PART 1 Terms and Conditions of the ML Bond and the Euro Bond...37 PART 2 Terms and Conditions of Application...42 ANNEX B FINANCIAL INFORMATION ABOUT THE CORINTHIA GROUP AND THE GUARANTOR...45 PART 1 Accountants Report...45 PART 2 Interim Financial Statements PART 3 Estimated Financial Statements PART 4 Financial Information about the Issuer ANNEX C LIST OF AUTHORISED SELLING AGENTS ANNEX D THE CORINTHIA GROUP OF COMPANIES ANNEX E SPECIMEN APPLICATION FORMS CORINTHIA FINANCE P.L.C. A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 5

6 DEFINITIONS In this document the following words and expressions shall bear the following meanings except where the context otherwise requires: Act Applicant Application Application Form Authorised Distributors Bonds Bond Offer Price Company or Issuer Corinthia Group CPHCL Directors or Board Euro Euro Bond Group Guarantor Interest Payment Date Maltese Liri the Companies Act, Cap. 386 of the Laws of Malta; a person or persons whose name or names (in the case of joint applicants) appear in the registration details of an Application Form; the application to purchase made by an Applicant by completing an Application Form and posting it or delivering it to the Registrar or the Authorised Distributors; the form of application for subscription of Bonds issued by the Company; all the licensed stockbrokers and financial intermediaries listed in Annex C of this Offering Memorandum; the ML Bond and the Euro Bond; the price of Lm100 for each ML Bond and the price of 97 for each Euro Bond; Corinthia Finance p.l.c.; CPHCL and the companies in which CPHCL has a controlling interest and which are set out in Annex D of this Offering Memorandum; Corinthia Palace Hotel Company Limited; the Directors of the Company whose names and addresses are set out under the heading DIRECTORS AND ADVISERS ; the single currency recognised as legal tender by the member countries of the European Monetary Union; the 10 million 6.5 per cent Bonds 2010 issued at the Bond Offer Price or, in the case of exercise of the Over-allotment Option, up to an aggregate amount of 20 million pursuant to this Offering Memorandum; CPHCL and the companies in which CPHCL has a controlling interest and which are set out in Annex D of this Offering Memorandum; CPHCL; means in the case of the ML Bond the 8 April and the 8 October of each year between and including each of the year 2002 and the year 2012 with the exception of the 8 April 2002; and in the case of the Euro Bond the 8 April of each year between and including each of the year 2003 and the year 2010; the lawful currency from time to time of the Republic of Malta; Malta Stock Exchange, MSE the Malta Stock Exchange established by the Malta Stock Exchange Act, Cap. 345 or Exchange of the Laws of Malta; ML Bond Offer Period the Lm4 million 6.75 per cent Bonds 2012 or, in the case of exercise of the Overallotment Option, up to an aggregate amount of Lm8 million issued pursuant to this Offering Memorandum; the period between the 14 March 2002 and the 28 March 2002 (or such earlier date as may be determined by the Issuer for each of the ML Bond and the Euro Bond) during which the Bonds are available for subscription; 6 CORINTHIA FINANCE P.L.C. A MEMBER OF THE CORINTHIA GROUP OF COMPANIES

7 Original Bond Issues Over-allotment Option Offering Memorandum Re-allocation Option Redemption Date Redemption Value Registrar, Underwriter or Manager in the case of the ML Bond the Lm4 million 6.75 per cent Bonds 2012 issued at the Bond Offer Price; and in the case of the Euro Bond the 10 million 6.5 per cent Bonds 2010 issued at the Bond Offer Price; the option of the Issuer to increase the Original Bond Issues by an aggregate maximum of an additional Lm4,000,000 in either (or partly in both) of the ML Bond or the Euro Bond as the Company may consider appropriate to be issued at the Bond Offer Price, in the event of over-subscription of the Original Bond Issues; this document in its entirety; the right of the Company, subject to the consent of an Applicant given in the Application Form, to allocate the over-subscriptions received in the ML Bond to any under-subscription in the Euro Bond and vice versa; 8 April 2012 in the case of the ML Bond and 8 April 2010 in the case of the Euro Bond; Lm100 for each ML Bond and 100 for each Euro Bond; Bank of Valletta p.l.c. CORINTHIA FINANCE P.L.C. A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 7

8 DIRECTORS AND ADVISERS OF THE COMPANY DIRECTORS Name: Address: Nationality: Name: Address: Nationality: Name: Address: Nationality: Name: Address: Nationality: Alfred Pisani MOM - Chairman & Chief Executive Officer Fiorita, Triq Giorgio Locano, Iklin, NXR 09, Malta Maltese Louis E. Galea MOM, F.C.I.B - Deputy Chairman 8, Garden Crescent, Saint Julians, STJ 12, Malta Maltese Joseph Fenech F.C.C.A., F.I.A., CPA Managing Director Zeus, Triq il-harruba, Iklin, NXR 09, Malta Maltese Joseph J. Vella LL.D Dar tax-xaghra, V. Boron Street, San Pawl tat-targa, NXR 06, Malta Maltese Company Secretary Name: Address: Nationality Alfred Fabri B.A. (Hons) Econ., D.B.A. 12, Valley View Court, Zaccheus Street, Msida, MSD 04, Malta Maltese MANAGERS, REGISTRARS, UNDERWRITERS & PRINCIPAL BANKERS Name: Address: Bank of Valletta p.l.c. BOV Centre, High Street, Sliema, SLM 16, Malta LEGAL COUNSEL Name: Address: Camilleri Preziosi Level 2, Valletta Buildings, South Street, Valletta, VLT 11, Malta REPORTING ACCOUNTANTS Name: Address: Grant Thornton Certified Public Accountants & Auditors Grant Thornton House, Princess Elizabeth Street, Ta Xbiex, MSD 11, Malta SPONSORING STOCKBROKER Name: Address: Wilfred Mallia Charts Investment Management Service Ltd 18a, 3rd Floor, Europa Centre, Floriana, VLT 15, Malta 8 CORINTHIA FINANCE P.L.C. A MEMBER OF THE CORINTHIA GROUP OF COMPANIES

9 KEY FEATURES 1. SHARE CAPITAL Authorised: Issued: Nominal Value: Lm1,000,000 Lm100,000 Lm1 2. EXPECTED TIME-TABLE Application Forms available 11 March 2002 Opening of Subscription lists 14 March 2002 Closing of Subscription lists 28 March 2002 Announcement of basis of acceptance 8 April 2002 Expected dispatch of allocation advice & Refunds of unallocated monies 15 April 2002 Commencement of Interest 8 April 2002 The Issuer reserves the right to close the Offer of ML Bonds or the Euro Bonds before the 28 March 2002 in the event of over-subscription. 3. KEY STRENGTHS OF THE CORINTHIA GROUP The Corinthia Group s key strengths are: strong and committed shareholders and executive directors with long experience in the hospitality industry who have delivered an excellent record of profit and asset growth; an experienced, proven and loyal local and foreign senior management team of international calibre with an average of over ten years service; a cadre of well-qualified and dynamic young professionals, fuelling the potential for future growth; an effective monitoring system assuring tight controls on standards and performance; properties planned and built to exacting standards with equally high standards demanded on maintenance resulting in high quality, well maintained assets; a fast expanding brand name Corinthia Hotels International ; an extensive marketing network in the feeder markets for the hotels; excellent geographical positioning with a strategically weighted portfolio in the emerging leisure and business destinations; a dynamic and selective acquisition strategy; diversification into industrial catering, construction, project management and other service ventures. CORINTHIA FINANCE P.L.C. A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 9

10 4. OVERVIEW OF ADJUSTMENTS PASSED IN THE ACCOUNTANTS REPORT. In compiling their report, the Accountants based their work on the Audited Financial Statements of the Corinthia Group for the three years ended 31 December 1998, 1999 and These Financial Statements were adjusted by them to restate the amounts and disclosures to: comply with the statutory requirements and accounting standards presently in force; eliminate the effects of certain inconsistencies between members of the Corinthia Group in the way the accounting policies were applied; eliminate the effects of certain items which had been recognised in the Audited Financial Statements in a period other than that during which they were incurred. The most significant of these adjustments was that made to restate the value of certain land and buildings to their estimated market values. In late 1997 and early 1998, the Corinthia Group carried out an extensive property revaluation exercise. Since certain members of the Group already carried immovable properties at revalued amounts, in the Accountants view it was necessary to treat all immovable properties owned by the Group in the same manner and to bring all properties to market values. The post-tax effect of this adjustment totalled Lm35 million at 31 December The following is a summary of this adjustment by country: Lm (millions) Hotels in Malta 19.5 (Architects valuation) Hotels in Turkey 6.2 (Directors valuation) Hotels in Hungary 6.3 (Directors valuation) Hotels in Tunisia 1.7 (Directors valuation) Property in Libya 1.3 (Directors valuation) During the year ended 31 December 2000, two hotels in Malta and one in Hungary were revalued in the books of the respective companies. In consequence, the Accountants adjustments were revised accordingly to exclude these properties. The post-tax effect of the revaluation after these revisions stood at Lm25 million as at 31 December A second adjustment of some significance related to the issue of deferred taxation. One subsidiary company acquired in 1998 did not recognise the deferred taxation effect arising on the revaluation of its land and buildings. Since this revaluation took place immediately prior to the acquisition of this company by the Group, this omission also effected the amount of negative goodwill and its amortisation. Negative goodwill represents the excess of the fair values of the net assets acquired over the consideration paid, and constitutes the savings made by the Group on acquisition of the subsidiary company. The net effect of the adjustments passed by the Accountants was to increase the value of the Group s net assets at 31 December 2000 by Lm22.2 million, and that of CPHCL by Lm4.8 million. Details of the adjustments passed, as well as reconciliations on a year by year basis of the Group s and CPHCL s profit and loss accounts and balance sheets, are set out in Annex B. 10 CORINTHIA FINANCE P.L.C. A MEMBER OF THE CORINTHIA GROUP OF COMPANIES

11 RISK FACTORS Before investing in the Bonds, prospective investors should consider all the information contained in this Offering Memorandum, including the investment considerations set forth below. See also Trading Prospects below. CONSIDERATIONS RELATING TO THE COMPANY The Company itself does not have any substantial assets and is essentially a special purpose vehicle set up for financing transactions of the Corinthia Group and has already issued a bond under the guarantee of CPHCL in September 1999 which bond was admitted to the MSE Offical List. The Bonds are being guaranteed by CPHCL and the information in this Offering Memorandum is designed to provide the prospective investor with sufficient information about CPHCL and the other companies comprising the Corinthia Group, to enable an investor to make an informed judgment as to the reliance on the guarantee. CONSIDERATIONS RELATING TO THE BUSINESS OF CPHCL The business of Corinthia Group is principally in the hotel and hospitality sector, which is partly a seasonal business. The operations of the Corinthia Group extend to the following countries: Hungary, the Czech Republic, the Russian Federation, Portugal, Turkey, Tunisia, Libya and Malta. This diversification is aimed at spreading the geographical risks and exposures usually associated with cyclical movements in the hospitality industry. Some of these operations are located in countries that are considered as emerging markets. Accordingly, there are certain risk factors which are particular to such operations and which may require consideration by prospective investors since they are not usually associated with business in the more developed markets of North America, Japan and Western Europe. Emerging markets present different economic and political conditions from those of the more developed markets and could possibly present less social, political or economic stability. Emerging economies may be susceptible to a higher degree of risk than investing in more developed markets. These risks may include changes in government policies, taxation, high inflation, interest rates and other restrictions on the repatriation of capital. Investors should be aware that any downturn in the economies of the countries where the Corinthia Group has invested, may adversely affect the business of the Corinthia Group. Emerging markets however normally also provide a lower cost of entry in investments than that of the more developed markets like North America, Japan and Western Europe. Moreover, the operating cost structures are also significantly lower than those in the more developed markets. The combination of these two effects give rise to substantial returns on investments that are normally greater than those traditionally associated with the more developed markets. In 1999, both Hungary and the Czech Republic were accepted by the European Union to commence the process for the eventual integration into the EU on its next enlargement. Similarly, Malta has also commenced a structured dialogue with the EU and it is also expected to shortly commence the process of integration. Each of them are expected, on the basis of current information, to be considered for full membership by January The entry of these countries in the European Union should contribute towards a more liberal and stable economic environment. Furthermore, Turkey has a Customs Union agreement with the European Union. Most of the risks normally associated with the uncertainties in developing markets, such as taxation, high inflation, interest rates, exchange controls and other restrictions on the repatriation of capital are normal business risks. The Corinthia Group has taken various measures to minimise the risks that may be associated with emerging markets. These include generating a substantial part of turnover in hard currency rather than in the local currency of the country to eliminate the risk associated with high inflation, borrowing in hard currency to benefit from lower interest rates and simultaneously creating a hedge against the income flow. Finally, in a number of these emerging markets, exchange control restrictions have either been removed completely or alternatively eased, thus rendering the repatriation of both capital and profits easier. CPHCL also has substantial interest in industrial catering activities in Libya. Libya is a country generally associated with a closed economy and restrictions related to exchange controls and the repatriation of capital. CPHCL has over the last 25 years managed to conduct its business in Libya profitably and without undue material problems. CORINTHIA FINANCE P.L.C. A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 11

12 PART I THE BOND ISSUES DETAILS OF THE BOND ISSUES The Company is making an offering of Bonds for subscription to the general public of: (i) 40,000 ML Bonds of a face value of Lm100 each Bond issued at par and redeemable on the Redemption Date at Lm100 each ML Bond; and (ii) 100,000 Euro Bonds of a face value of 100 each and issued at 97 each and redeemable on the Redemption Date at 100 each Euro Bond. In the event of an over-subscription, the Company may, at its option, issue further Bonds in either or both of the Original Bond Issues up to an aggregate maximum of either 40,000 ML Bonds or a maximum of 100,000 Euro Bonds or a combination of both, pursuant to the Over-allotment Option to meet applications for subscriptions. In addition, the Company may, subject to the consent of an Applicant to be given in the Application Form, re-allocate over-subscriptions in the ML Bond to any under-subscription in the Euro Bond and vice-versa pursuant to the Re-allocation Option. The Bonds are being issued with the joint and several guarantee of CPHCL (See Guarantee below). The following is a brief description of the Bond Issues: The ML Offering: The Euro Offering: The offering by the Company consists of a general offering of 40,000 Bonds of a nominal value of Lm100 each being offered at par. The offering by the Company consists of a general offering of 100,000 Bonds of a nominal value of 100 each being offered at 97. Interest: (i) In the case of the ML Bond 6.75 per cent per annum payable six-monthly in arrears on 8 April and 8 October in each year, the first interest payment to be effected on 8 October 2002; and (ii) In the case of the Euro Bond 6.5 per cent per annum payable annually in arrears on 8 April in each year, the first interest payment to be effected on 8 April Maturity & Redemption: Guarantee: Over-allotment Option: Re-allocation Option: The Bonds will be redeemed on the Redemption Date at the Redemption Value, subject to the right of the Company to purchase Bonds on the open market before the Redemption Date at the current market prices. Any Bonds so purchased shall be cancelled. The Guarantor is, jointly and severally with the Company, guaranteeing the payment of the nominal value of the Bonds on the Redemption Date and of the interest on the Bonds on each Interest Payment Date. The Company, with the consent and under the guarantee of the Guarantor, reserves the right to issue further Bonds to meet applications for subscription up to, and not exceeding, the aggregate amount of Lm4,000,000 (or 10,000,000) which it can exercise by issuing further Bonds in either of the ML Bond or the Euro Bond or both in such proportions as the Company may deem appropriate depending on subscription levels. The Company reserves the right, subject to the consent of an Applicant in the Application Form, to re-allocate any over-subscription in the ML Bond to undersubscriptions in the Euro Bond and vice-versa. 12 CORINTHIA FINANCE P.L.C. A MEMBER OF THE CORINTHIA GROUP OF COMPANIES

13 PURPOSE OF THE ISSUES The Company is a fully owned subsidiary of the Guarantor and has been set up as a finance company for the Corinthia Group. The proceeds of the Bond Issues will be advanced by the Company to the Guarantor for general corporate funding purposes aimed at further consolidating and strengthening the Corinthia Group s position in a number of business units. The funds will be employed to enable the Group to further develop business opportunities arising from its continued international expansion. These include capital expenditure programmes for the refurbishment and upgrading of a number of existing hotel properties and hotel construction projects. Accordingly, part of the funds will support the enhancement of facilities of the Tripoli Hotel project currently underway and, in particular, upgrade the standard of the commercial centre component of this development which is being leased to third parties. Furthermore, part of the funds will enable the Corinthia Group to further consolidate and organise its construction unit in Libya, with a view to participating in the country s ambitious infrastructure development programme. Finally, funds will also be utilised to enable the more efficient management of the Group s cash resources and corporate treasury operations. For this purpose, the Company is issuing the Bonds denominated partly in Maltese Lira and partly in Euro and will advance the proceeds thereof to the Guarantor in the same currency with the intention of matching its expected revenue and expenditure flows whilst maintaining a level of hedging against possible currency movements in the Maltese Lira and the Euro. In the event that the Company exercises the Over-allotment Option to meet subscription applications, any proceeds thus raised shall also constitute part of the advances to be made by the Company to the Guarantor for the purposes set out above. Placing Arrangements The Company has entered into conditional subscription agreements. In terms of these agreements, the investors have bound themselves to subscribe and purchase upon closing of subscription lists, and the Company has bound itself to allot to such investors an aggregate not exceeding 50 per cent of each of the Bond Issues. Subscriptions under these arrangements are subject to the same terms and conditions of the Bonds contained in the Offering Memorandum. Allocation Policy Upon closing of the subscription lists and within seven working days of the closing of the ML Bond or the Euro Bond whichever is the later, the Registrar shall announce the basis of acceptance of Applications for Bonds and the Allocation Policy to be adopted. It is expected that the Issuer will: (a) first allocate Applications to the Original Bond Issues in each of the ML Bond and the Euro Bond. (b) In the event that the Original Bond Issue in one Bond is over-subscribed and the other is under-subscribed, then the Issuer shall exercise the Over-Allotment Option by issuing further Bonds to meet subscriptions in the Bond that is over-subscribed. (c) In the event that notwithstanding the exercise of the Over-allotment Option as provided in paragraph (b) above, there still remains Applications which are unsatisfied in the Bond that is over-subscribed, then the Issuer shall first scale down all Applications in that Bond pro rata and then re-allocate to the Bond Issue remaining under-subscribed that portion of Applications remaining unallocated and which have the consent of the Applicant to be re-allocated. If after such re-allocation or in the case of Applicants who do not opt for the re-allocation of their application monies between Issues there remains unapplied application monies, then the Applicant shall receive a refund of the value of the Bonds applied for but not allocated, by cheque sent by mail, at the Applicant s own risk, to the address specified in the Application Form within seven working days from the date of final allocation. No interest shall be due on refunds. The Company shall be making preferred allocation of Bonds to all full-time employees and their spouses (in this section referred to as employees ) of the Corinthia Group on the 28 February Upon Application, each employee shall be given a preference allocation up to the first Lm5,000 in ML Bonds and up to 10,000 in Euro Bonds applied for, for which an Application Form has been submitted by such employee (the Preference Allocation ). Members of the Board of Directors of the Company, the Guarantor and other companies of the Corinthia Group and their spouses shall also be eligible for the Preference Allocation. CORINTHIA FINANCE P.L.C. A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 13

14 Offer Expenses Selling commission is payable to Authorised Distributors. Each Authorised Distributor shall be entitled to a selling commission on the value of Bonds allocated to Applicants applying through such Authorised Distributor at the following rates : 0.5 per cent on the first 10,000 ML Bonds or 25,000 Euro Bonds; and 0.6 per cent on any Bonds in excess of the first 10,000 ML Bonds or 25,000 Euro Bonds. Professional fees, publicity, advertising, printing, listing, underwriting, management, registration and other miscellaneous costs, excluding selling commissions, are estimated not to exceed Lm150,000. DIRECTORS The Directors currently in office are expected to remain in office at least until the next Annual General Meeting. Authorisations The issue of the Bonds has been duly authorised by the Malta Stock Exchange. The Bonds are expected to be admitted to listing on the Malta Stock Exchange and for dealings in the Bonds to commence following admission. Permission from the Malta Financial Services Centre for the issue of this Offering Memorandum in terms of Section 11 of the Investment Services Act (Cap. 370 of the Laws of Malta) is not required by virtue of the exemptions contained in Legal Notices 6 and 95 of 1995 Underwriting By an agreement dated 7 March 2002, between the Issuer, the Guarantor and the Underwriter, it was agreed that in the event that any Bonds remain outstanding after the end of the Offer Period, the Underwriter shall purchase all such outstanding ML Bonds at par and all outstanding Euro Bonds at the Bond Offer Price. The proceeds from any Bonds purchased by the Underwriter pursuant to its underwriting commitment shall be applied in reduction of the banking facilities made available by the Underwriter to the Guarantor or other Corinthia Group companies, without prejudice to any rights of security currently enjoyed by the Underwriter in connection with the facilities so reduced. TAXATION Tax on Interest Unless the Issuer is otherwise advised by a Bond holder resident in Malta who is not a fund of a collective investment scheme, interest shall be paid by the Issuer to such Bond holder net of a deduction for tax at source at the rate of 15 per cent (15%) pursuant to section 33 of the Income Tax Act (Cap. 123 of the Laws of Malta). This withholding tax is considered as a final tax. Whilst corporate Bond holders are obliged to declare the interest so received in their income tax return, individual Bond holders are not required to declare the interest so received on their income tax return. In the case of an election by a Bond holder resident in Malta who is not a fund of a collective investment scheme to receive the interest due without the deduction of withholding tax, then interest will be paid gross by the Issuer and such Bond holder will be under an obligation to declare interest so received on his/her income tax return. Any such election by a Bond holder at the time of application may be changed by the Bond holder by giving written notice to the Issuer or the MSE, as the case may be. Non-resident Bond holders are not taxable in Malta on the interest received and will receive interest gross. Tax on discount The rules relating to tax on interest similarly apply to the discount of 3 per 100 nominal receivable by the Bond holder upon maturity. 14 CORINTHIA FINANCE P.L.C. A MEMBER OF THE CORINTHIA GROUP OF COMPANIES

15 Tax on Capital Gains Any gain arising on disposal of the Bonds is not chargeable to Maltese income tax. The information above does not constitute legal or tax advice, and is based on tax law and practice applicable at the date of this Offering Memorandum. Investors are reminded that tax law and practice may change from time to time. INVESTORS AND PROSPECTIVE INVESTORS ARE URGED TO SEEK PROFESSIONAL ADVICE AS REGARDS BOTH MALTESE AND ANY FOREIGN TAX LEGISLATION APPLICABLE TO THE ACQUISITION, HOLDING AND DISPOSAL OF BONDS AS WELL AS INTEREST PAYMENTS MADE BY THE COMPANY. THE ABOVE IS A SUMMARY OF THE ANTICIPATED TAX TREATMENT APPLICABLE TO THE BONDS AND TO BOND HOLDERS. THIS INFORMATION, WHICH DOES NOT CONSTITUTE LEGAL OR TAX ADVICE, REFERS ONLY TO BOND HOLDERS WHO DO NOT DEAL IN SECURITIES IN THE COURSE OF THEIR NORMAL TRADING ACTIVITY. CORINTHIA FINANCE P.L.C. A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 15

16 PART II - THE COMPANY The Company is a public limited liability company, registered on 9 September 1999 with number C in terms of the Act, and has its registered office at 22, Europa Centre, Floriana, VLT 15, Malta. The Company has an authorised share capital of Lm1 million and an issued and fully paid up share capital of Lm100,000 divided into 100,000 ordinary shares of a nominal value of Lm1 each share. The Company is a fully owned subsidiary of the Guarantor. BUSINESS The Company was set up and established to act as a finance company for the Corinthia Group and is a fully owned subsidiary of CPHCL. In September 1999, the Company issued Lm10 million 6.70 per cent Bonds redeemable in The proceeds of that bond issue were advanced to CPHCL pursuant to and under the terms of a loan agreement dated 10 September The Company receives interest on the loan to CPHCL at the rate of 6.80 per cent per annum on the 15 October of each year. The loan is repayable by not later than 15 October CPHCL has punctually effected all payments of interest on the loan. The Company was set up with the object of developing its business acting as the finance arm of the Corinthia Group. The Bond Issues fall within the objects of the Company that is expected to continue to play a central role in the further development of the Corinthia Group as a vehicle through which it will fund its expansion programme. The Company has also entered into a loan agreement dated 7 March 2002 with the Guarantor (the Loan Agreement ) pursuant to which the Company will advance to the Guarantor the proceeds from the Bonds under the terms and conditions set out therein. In terms of the Loan Agreement there will be two advances made to the Guarantor, namely an advance equal to the proceeds of the ML Bond ( ML Loan ) and another advance equal to the proceeds of the Euro Bond ( Euro Loan ). The ML Loan shall be drawn down by the Guarantor in Maltese Liri and shall bear interest at the rate of 6.85 per cent per annum with interest payable six-monthly in arrears on 25 March and 25 September of each year. The Euro Loan shall be drawn down by the Guarantor in Euros and shall bear interests at the rate of 6.6 per cent per annum, payable in 25 March of each year. The first interest payment on the ML Loan shall be paid on 25 September 2002 and with respect to the Euro Loan on 25 March In terms of the Loan Agreement the Guarantor bound itself to repay the ML Loan by not later than the 25 March 2012 and the Euro Loan by not later than 25 March 2010 All expenses incurred in the preparation and implementation of the Bond Issues shall be at the charge of CPHCL. DIRECTORS SERVICE CONTRACTS None of the Directors of the Company have a service contract with the Company. All Directors may be removed by the shareholder appointing them or by an ordinary resolution of the shareholders in general meeting. AGGREGATE EMOLUMENTS OF DIRECTORS For the current financial year ending on 31 December 2002 the Company proposes to pay an aggregate of Lm10,000 to its Directors. LOANS TO DIRECTORS There are no loans outstanding by the Company to any of its Directors nor any guarantees issued for their benefit by the Company. 16 CORINTHIA FINANCE P.L.C. A MEMBER OF THE CORINTHIA GROUP OF COMPANIES

17 PART III - THE GUARANTOR CPHCL is a private limited liability company, registered on 21 June 1966 with the number C 257 in terms of the Commercial Partnerships Ordinance, (Cap.168 of the Laws of Malta) and having its registered office at 22, Europa Centre, Floriana VLT 15, Malta. The Company is compliant with and regulated by the provisions of the Act. SHARE CAPITAL The authorised share capital of CPHCL is Lm2,831,200 divided into 16,200 ordinary A shares of a nominal value of Lm1 each, 15,000 ordinary B shares of a nominal value of Lm1 each, 1,400,000 non-voting 6 per cent C preference shares and 1,400,000 non-voting, cumulative, redeemable 6 per cent D preference shares. The share capital has been fully issued and subscribed as follows and is fully paid up: Shareholder Ordinary Shares Preference Shares A & A Pisani & Company Limited 2,700 A 233,335 D J & H Pisani & Company Limited 2,700 A 233,333 D PAKA Limited 2,700 A 233,333 D VAC Company Limited 2,700 A 233,333 D Rosanne Fenech 2,700 A 233,333 D Intakur Limited 2,700 A 233,333 D Libyan Arab Foreign Investment Company ( LAFICO ) 15,000 B 1,400,000 C Pursuant to the memorandum and articles of association of CPHCL, out of a maximum of five Directors, the holders of the Ordinary A shares are entitled to appoint three Directors, including the chairman who is entitled to a casting vote. The holders of the ordinary B shares are entitled to appoint the remaining two Directors. STRATEGIES The Corinthia Group s development strategy is intrinsic to its core interests as investors, developers and operators of quality hotels in Europe, Africa and the Mediterranean rim, as well as operators of large scale industrial catering services in these geographical regions. The Corinthia Group has thus continued to organise itself at a strategic level into four distinct business units, each of which plan and implement well-defined strategies driven by the objective of continued growth, furtherance of their core interests and the ongoing optimisation of profitability of its operations. These business units are organised within the following four core competencies: (i) the investment and acquisition of hotel and related real estate; (ii) the management and operation of upscale hotels; (iii) construction and the provision of project management services; and (iv) industrial catering. This strategy is imbued at all levels of internal management structures providing a focus and benchmark for: (i) further investment; (ii) improving operating standards and efficiencies; (iii) the evolution of business development and marketing strategies to adapt to and profit from the ever-changing markets; and (iv) the fostering of human resources to support the Corinthia Group s overall strategic objectives. In the investment sector, the Corinthia Group continues to play an important role as an international investor in hotel real estate, to date having whole or part ownership interests in 29 properties world-wide. Since March 2000, this business has been conducted through a new subsidiary International Hotel Investments p.l.c. ( IHI ) which, subsequent to its flotation on the MSE, has undertaken continued efforts to invest in Europe and the Mediterranean, particularly in areas that provide the right balance of political and economic stability and the opportunities for commercially viable direct investment with a potential for growth. IHI s investment in the high-rise Alfa Hotel in Lisbon in August 2001 and the acquisition of the five-star Nevskij Palace Hotel in St. Petersburg in January 2002, are indicators of the Corinthia Group s strategy for continued growth and development in the hotel investment sector through IHI. CORINTHIA FINANCE P.L.C. A MEMBER OF THE CORINTHIA GROUP OF COMPANIES 17

18 Simultaneously, the Corinthia Group has continued to consolidate and strengthen its hotel management business, through which it is intended to also develop further the goodwill and reputation of the Corinthia brand, Corinthia Hotels International, and to position it amongst the leading independent hotel operators represented in these regions. Since March 2000, this business has been organised into a fully autonomous subsidiary C.H.I. Limited ( CHI ) which has entered into management agreements for the operation of the Corinthia Group s four- and five-star hotels, as well as pre-operating and management agreements with independent hotel owners in various countries. It is planned that further growth will be achieved through the continued provision of such management services by CHI or franchise relationships with hotel owners and developers. In the catering sector, further consolidation is expected in the Corinthia Group s penetration of its current markets, supported by an aggressive plan to enter other markets that have so far remained untapped. This sector is noncapital intensive and the pursuits of these objectives will therefore be a measure of the Corinthia Group s ability, perseverance and expertise without undue pressure on financial resources. Finally, in line with its plans for further expansion in the project management and construction industry, the Corinthia Group has established a number of subsidiaries. Foremost amongst these is Quality Project Management Limited ( QPM ), an autonomous company, which provides project and construction management services to the Corinthia Group itself as well as an increasing number of independent clients. The expertise and experience accumulated in the construction, development and refurbishment of Corinthia hotels over the past 35 years has thus assisted QPM in establishing itself as a leading international provider of project and construction management services. Furthermore, the Corinthia Group is also aiming to position itself among the leading construction companies in Libya, having already set up a fully-fledged construction unit there to build the Corinthia Group s own five-star high-rise hotel and commercial centre. Acting on expert support and alliances with major multinational construction firms, the Corinthia Group s fully-equipped construction unit in Libya today employs over 600 persons and is poised to initiate a major expansion program aimed at tapping into this country s aggressive infrastructure development programme. In conclusion, the strategy of the Corinthia Group remains, generally, to further diversify its operations and sources of revenue both geographically and by activity. This is designed to render it more flexible in meeting the challenges of the future and to adapt to the ever-changing needs of a more competitive environment. TRADING PROSPECTS The directors of CPHCL expect that the Corinthia Group will, in the absence of unforeseen circumstances, at least maintain the financial and trading results which it has achieved in the past three financial years. In other parts of this document, certain trade factors and risks which may have an impact on the trading and financial prospects of the Corinthia Group, have already been set out. (See Risk Factors ). The Corinthia Group has made a net profit after tax but before exceptional items in 2001 of Lm9.8 million, as against Lm8.9 million in 2000 and Lm7.3 million in Following the devaluation of the Libyan Dinar in January 2002, the Corinthia Group booked an exceptional item in its 2001 profit and loss account reducing profits for the year by Lm2.8 million. Additionally, following currency fluctuations of the Euro in relation to the Czech Krone, the Group booked an exceptional gain in its 2001 results of Lm1.8 million. Following the 11 September incidents, it has become more difficult to assess the future trading prospects of the Corinthia Group, particularly in view of its exposure to the tourism and leisure industry which is perceived as being vulnerable to a lack of international political stability and the uncertainty it brings about. The immediate reaction to the 11 September incidents has been a material decline in the tourism and hospitality industry world-wide. However, inspite of these incidents, the profit figures of the Corinthia Group for 2001, save for the adverse impact thereon of the devaluation of the Libyan Dinar, exceeded those for the year This is an indication of the Corinthia Group s resilience to exceptional occurrences. The exact extent of decline in business following the 11 September incidents is still uncertain and their impact could well be felt on the business of the Corinthia Group in the first months of the current financial year. In the medium to longer term, however, it is expected that the situation stabilizes and that the current uncertainty surrounding the travel industry should subside. It is still too early, however, to determine with any reasonable level of certainty how international political events will evolve. Moreover, if the current uncertainty were to be protracted, the travel and hospitality sectors in which the Corinthia Group operates will come under severe pressure and could have an adverse effect on its revenues and profitability. The directors, however, believe that in the context of the 11 September events, the jurisdictions where Corinthia hotels are located are of a lower political risk profile then jurisdictions that are more actively involved in the aftermath of those events. In this context they believe that, save for the general uncertainty surrounding the travel industry generally, there are no jurisdiction-specific factors that should have an adverse effect on the operations in those jurisdictions. 18 CORINTHIA FINANCE P.L.C. A MEMBER OF THE CORINTHIA GROUP OF COMPANIES